Service Marketing Notes

7/30/2019 Service Marketing Notes

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MM-403-SERVI CE

MARKETI NG

SAURABH GARG


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SAURABH GARG

Course Cont ent s

The emergence of service economy; Nature of

services; Difference in goods and service Marketing

Challenges in service business

Marketing framework for service business

The service classification: Service productdevelopment


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The service consumer behavior

Service management trinity :service

vision and service strategy

Quality issues and quality models;managing productivity and

differentiation in a service organization:demand supply management


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Advertising branding and packaging ofservices

Recovery management

Relationship marketing

Employee empowerment

Customer involvement in service


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WHY STUDYSERVICE

MARKETING


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SERVICE SECTOR CONTRIBUTION TOINDIAN ECONOMY

YEAR TERTI ARY SECTOR GROWTHOVER

PERI OD(% in

services)

1950-51 28.5 -

1960-61 29.1 +2.1

1970-71 31.9 +9.6

1980-81 36.0 +12.9

1990-91 39.1 +8.6

1999-2000

2001-2011

47.9

56.5

+22.5

+12


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Indian Service Sector: An

Overview The services sector (financial and non-

financial) attracted cumulative foreign

direct investments (FDI) worth US$26,873 million between April 2000 andFebruary 2011, accounting for 21 % of

the total FDI inflows.

Department of Industrial Policy and

Promotion (DIPP).


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Overview The INSURANCE sector to reach US$

350-400 billion in premium income by

2020, making India

amongst the top 3 life insurance markets

and

top 15 non-life insurance markets by the

year


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Overview The HEALTH services sectors sale is

expected to grow by 19.8 % in 2011-12

driven by a healthy rise in sales.

The sectors PAT increased by a

whopping 107.1 % (Q3- 2010-11)


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Overview MEDICAL TOURISM in India has emerged

as the fastest growing segment of

tourism industry with 3,371 hospitals andaround 754,985 registered practitioners.


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Overview

The overall Indian IT- ITeS revenue hasgrown to US$ 63.7 billion in 2009-10and an estimated US$ 76.1 billion in

2010-11, translating into a CAGR of22.5 % from 2004-05 to 2010-11.


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Overview

BANKING and FINANCIAL services,

HEALTHCARE emerging as the mostattractive sectors for the investors.


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Indicators

TRANSPORT sector growth,

cargo handled at major ports (0.5%),

cargo handled by the civil aviation(25.3%),

passengers handled by the civil aviation

(12.2%)

in Q2 of 2010-11 over Q2 of 2009-10.


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Indicators

COMMUNICATIONS sectors, the totalstock of telephone connections

registered growth 38.7 % in Q2 of 2010-11 over Q2 of 2009-10.

Aggregate bank deposits, and bank

credits have shown growth rates of 14.3%, and 19.0 %, respectively in Q2 of 2010-11 over Q2 of 2009-10.


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Indicators

The domestic HOSPITALITY sector is expectedto see investments of over US$ 11 billion by

2012, with 40 international brands makingtheir presence in the country in the next fewyears.

Foreign tourist arrivals (FTAs) during the period Jan-Mar2011 were 1.73 million with a growth of 11.1 % over lastyear.

In FTA a growth rate of 7.4 % in Mar 2011 over Mar2010 was recorded.


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Exports

India ranks 12th in commercial servicesexports.


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Exports

The contribution of the services sector tothe Indian economy has been manifold:

a 55.2 % share in gross domestic product(GDP), growing by 10 % annually

contributing to about a quarter of totalemployment.


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Investments

C-Edge, a joint venture of the country's largestbank SBI with Tata Consultancy Services(TCS), is getting anywhere anytime bankingservices to rural customers.


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Investments

Reliance Industries Ltd (RIL) has announced its

entry into financial services through a jointventure (JV) with the New York-based D EShaw Group. The JV would draw upon thecore competencies of both firms to develop a

platform that can serve the growing needs ofIndian companies and individuals.


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Investments

The BCG Group plans to build a multidisciplinary

health facility, BCG Healthsquare in Kochi,Kerala, by August 2011. The companys long-term plan is to set a 750,000 square feethealth village with an estimated cost of US$

88.91 million.


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Investments

Hospitality group EIH, which runs the Oberoi

hotels, is actively looking to expand in Europeand intends to open three out of its next fivehotels outside India even as it continues to

see opportunities in the domestic market.


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Investments

Delhi-based upscale hotel chain Lemon Tree

Hotels plans to have at least 20 hotels of thefour-star category operational in two years,as part of its strategy to tap the potential incities in the North, West and South of India.


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Investments

The Delhi Metro, the first metro train to Indira

Gandhi International (IGI) airport, withcoaches imported from Spain, will cover a 23km stretch of the Airport Express Line. Theline has been built at a cost of US$ 1.26

billion.


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Services

There are no such thing as service

industries. There are only industrieswhose service components are greateror less than those of other industries.

Everybody is in service.

-Theodore Levitt-


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Understanding Services

Activities, benefits and satisfactions, which areoffered for sale or are provided in connectionwith the sale of goods

A M A, Committee of Definitions ,1960


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What is a service?

It is intangible.

It does not result in ownership.

It may or may not be attached with aphysical product


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Examples of Service Sector

UTILITYElectricity , water supply

Legal and Defence services.Judiciary, Navy Air

force, Army and Police

Transport .Railways, Air Transport, Postal

Distribution .Wholesale retailing etc

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Examples of Service Sector

Banking and Insurance.Private Public, Stock

broking

Entertainment..Theater, cinema, clubs, hotels,

restaurants

OthersHealth clubs, beauty parlors, domestic

help, dry-cleaning, matrimonial services

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Services include all economic activitieswhose output is not a physical product or

construction, is generally consumed at thetime it is produced, and provides addedvalue in forms (such as convenience,

amusement, timeliness, comfort or health)that are essentially intangible concerns ofits first purchaser

(Quinn, Baruch and Paquette, 1987).


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Services are deeds, processes, andperformances.

A service is a time-perishable, intangibleexperience performed for a customer

acting in the role of a co-producer.


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Role of Service in ourEconomy


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REASONS FOR

GROWTH OFSERVI CE I NDUSTRY

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Affluence.Increase in per capitaIncome..Personal security , interior

design Leisure Time.Holiday , Entertainment

Life Expectancy.old age homes ,

nursing homes Health Consciousness .health clubs ,

gyms


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Working Wives.packed foods ,day care

Product Complexity..microwave ovens, water purifiers , home computers

Lifes Complexitytax consultants, legal

advisors New Products..internet service

providers


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Difference

between Services

and Goods

Diff b t h i l


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Difference between physicalgoods and services

Physical goods Services

tangible intangible

homogeneous heterogeneous

Production and distribution areseparated from consumption

Production, distribution andconsumption are simultaneous

processes

A thing An activity or process

Core value processed in factory Core value produced in the buyer-seller

interaction

Customers do not participate in the

production process

Customers participate in production

Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership

The Goods Services


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12 - 38

Cannedfoods

Ready-madeclothes

Auto-mobiles

Draperies,Carpets

Rest-aurantmeals

Repairs:auto, house,landscaping

Airtravel

Insurance,Consulting,Teaching

MOSTLY GOODS MOSTLY SERVICES

The Goods-Services

Continuum


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1. Intangibility: An Importantand Unique difference.

Compare the difference between purchasing a movie

ticket and purchasing a pair of shoes

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Tangible

Dominant

Intangible

Dominant

Salt

Soft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-food

Outlets

Tangibility Spectrum

M k i P bl


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Market ing Problemscaused by I ntangibil it y

Lack of ability to be stored.results in constant

demand and supply problems

Lack of protection by patents

Difficulty in Displaying or communicating

serviceseg: Insurance

Difficulty in pricing Services

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Possible Solutions to

Intangibility Problems The use of Tangible clues.

The use of personal sources of information

Creation of a strong brand image

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2. Inseparability

It refers to:-

The service providers physical connection to the

service being provided

The customer involvement in the service production

process

The involvement of other customers in the service

production process

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3. Heterogeneity

Lack of ability to control the service quality before it

reaches the consumers.

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4.Perishability

Services cannot be inventoried

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Classifying Services


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Basis for Classification

End user Consumer: leisure, hairdressing, personal finance,

package holidays. Business to business: advertising agencies, printing,

accountancy, consultancy. .

Industrial: plant maintenance and repair, work wear

and hygiene, installation, project management.


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Service Tangibi li t yThe degree of tangibility of a service can be used to

classify services: Highly tangible: car rental, vending

machines,telecommunications.

Service linked to tangible goods: domestic appliance

repair, car service. Highly intangible: psychotherapy, consultancy, legal

services.

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People-based ServicesServices can be broken down into labour-intensive

(people based) and equipment-based services. Thiscan also be represented by the degree of contact:

People-based services - high contact: education,dental care, restaurants, medical services.

Equipment-based -low contact automatic carwash,launderette, vending machine, cinema.

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ExpertiseThe expertise and skills of the service provider can

be broken down into the following categories: Professional: medical services, legal services,

accountancy, tutoring.

Non-professional: babysitting, care taking, casual

labor.

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Prof it Orient at ionThe overall business orientation is a recognized

means of classification: Not-for-profit: The Scouts Association, charities,

public sector leisure facilities.

Commercial: banks, airlines, tour operators, hotel

and catering services.

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3/13/2012 Saurabh Garg 52

NEW PRODUCT DEVELOPMENT


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What is a New Product?

A new product is a product that is newto the company introducing it even

though it may have been made in someform by the other.

Any product that consumers treat as an

addition to the available choices couldbe considered as a new product.


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ROUTES OF NEW PRODUCTS

DEVELOPMENT New to the world products:New products that

create an entirely new market.

New product lines : New products that allowa company to enter an established market forfirst time.

Additions to the existing product lines : New

products that supplement to companysestablished product lines.( package sizes ,flavors etc.)


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ROUTES OF NEW PRODUCTS

DEVELOPMENT Improvement and revisions of existing

products : New products that provide

improved performance. Repositioning : Existing products thatare targeted to new markets or marketsegments.

Cost reductions : New products thatprovide similar performance at lowercost.


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Why New Product ?

Growth and Expansion of the company.

Higher profit margins.

Utilization of existing capacity.

Competitive pressure.


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Stages in New Product

Development Step 1

IDEA GENERATION


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SOURCES OF NEW IDEAS

Internal sources: Basic research.

Production deptt.

Sales people.

Top management.


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SOURCES OF NEW IDEAS

External sources :

Secondary sources ofinformation.

Competitors.

Customers. Distributors.

Foreign markets.


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Step 2 Idea Screening

All good ideas are not equallypromising.

Resource constraints. Screening Methods :

Checklist method.

Idea rating method.


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Drop error occurs when the companydismisses an otherwise good idea

because of lack of vision of itspotentialities.

Ford recognize the promise of an

automobile but he did not realize theneed to segment the market into priceand performance categories which wasfully capitalize by General Motors of


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Go Error : It occurs when the companylets a poor idea to proceed to

development and commercializationstages.

Absolute failure.

Partial product failure Relative product failure.


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Absolute failure.

Resulting in loss of money and its sales donot cover even variable costs.

Partial product failure.

That results in loss of money but its salescover variable costs and some of fixed costs.

Relative product failure. That yields a profit which is lower than

companys normal rate of profit.


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Step 3 Business Analysis

It is an in-depth study of the estimatedeconomic feasibility of new product

ideas. Demand analysis

Cost analysis

Profitability analysis


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Step 4 Product Development

During the development stage theproduct idea is converted into

tangible physical product. Thisinvolves design and formulation of theproduct and development of a technical

and commercial method ofmanufacture.


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Technical development aspect : Applied engineering research.

Manufacturing method research. Market development aspect: Product concept testing

Developing other elements of marketingmix.


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STEP 5 Test Marketing

Test Marketing is the controlledexperiment done in a limited but

carefully selected part of the wholemarket .

It is the actual conduct of marketing

campaign within a limited market for aperiod that is hoped to be long enoughto indicate its probable success on alarge scale and indefinite basis.


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To improve knowledge of potentialproduct sales.

To pretest alternative marketing plans. To predict product faults.

To know reaction of competitors.


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STEP 6 Commercialization

It is the actual introduction of theproduct into the market place , with all

the related decisions and resourcecommitments.

Entire market versus selected

segments. Crash versus roll out introduction.


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Crash introduction.

It is the full scale commercialization of newproduct as quickly as possible. The resourcesneeded to move into target markets areimmediately committed.

Roll out introduction.

Target markets are decided geographicallyand initially the new product is introducedonly in one or few areas.


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The Service Consumer Behavior


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Consumer Behaviour

This is defined as the actions & beliefs that

guide a person to purchase a particular

product or service. The emphasis on servicesby companies across the worlds has lead to agrowth in the expectations of customerstoday.


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The purchase decisions of customers are not

made in isolation, but rather they are

influenced by environmental factors such as

culture, social class, family & other factors

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The study of CB requires inputs from variousdisciplines, such as sociology, psychology &economy. CB deals with the study of thefactors that influence a customer inpurchasing a product, service and the processthat he goes through, to evaluate the

product/service prior to & even after itspurchase & use.

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THE CONSUMER


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THE CONSUMER

BUYING PROCESS :Marketing scholars have developed afive stage model of the buying decision

process. It's not necessary that all thestages are involved in all decisionprocesses. Depending on the level &views of the decision any stage can beskipped or changed in order of implementation.


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1. Problem / Need Recognition when thebuyer recognises a problem or a need maybe triggered by an internal or external stimuli.Marketer are good in arousing these stimuliby understanding circumstances which triggerthem.


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2. Information Seeking (Pre-purchase Search) when an aroused consumer seeks more & detailedinformation.

Active Information Search searching for all possiblesources of info like reading materials, phoning afriend, visiting stores, websites, etc. Marketers mustunderstand the major sources of info & their relative

type & nature of influence on the final purchasedecision.


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These sources fall into four major groups :

i. Personal sources family, friends, neighbors,acquaintances.

ii. Commercial sources advertising, sales persons,dealers, packaging, displays,

iii. Public sources mass media, consumer ratingorganizations

iv. Experiential sources handling, examining, usingthe products.


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3. Evaluation of Alternatives this involves selectionof a few best choices available by a systematic,conscious & rational basis.


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4. Purchase Decision / Behaviour the consumerforms an intention to buy the most preferred brand ina given category of products.


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Decision process involves i. Total set all brands available in a category of

products,

ii. Awareness set the consumer comes to know onlya subset of these brands,

iii. Consideration set the consumers initial buyingcriteria match these brands and he gathers more info,

iv. Choice set finally a few will remain which may beall acceptable as a buy,

v. Final Decision this brand is finally decided to bepurchased.


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In executing a purchase decision the consumer maymake up to 5 sub decisions :

i. Brand decision - which company & brand,

ii. Vendor decision - which shop & place

iii. Quantity decision what quantity,

iv. Timing decision when to buy,

v. Payment decision cash, credit, instalment,credit/debit card.


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5. Post Purchase Behaviour / Evaluation Afterpurchasing the product the consumer will experiencesome level of satisfaction / dissatisfaction. A

marketers job is to carefully monitor the following: a. Post purchase satisfaction the buyers

satisfaction is a function of closeness between itsexpectation & the products perceived performance.


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i. If performance falls short of expectation, then thecustomer is disappointed,

ii. If performance meets the expectation, then the

customer is satisfied, iii. If performance exceeds the expectation, then the

customer is delighted.


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b. Post purchase actions the level of satisfaction /dissatisfaction with the product shall decide theconsumers subsequent behavior :

i. Satisfied consumers may repeat the purchase, mayrecommend to others to buy

ii. Dissatisfied consumer may abandon or return orexchange the product. They may even take public

action or legal action. They may stop buying theproduct (exit option) or warn others not to buy (voiceoption).


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Factors Influencing

Consumer Behaviour


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1. Culture : Culture consists of values, norms, roles &customs shared by members of a society. It differsfrom place to place. The culture of a place plays a

vital role in determining the value & attitude of thepeople of that place, and in turn their purchasebehaviour So the marketers should have anunderstanding of the culture of different places, inwhich they like to market services.


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2. Sub-Cultures : Sub-Cultures are smaller divisions ina society with similar norms, values, behaviourpatterns, which make them distinct from the main

culture. As lifestyle, geography, ethnicity, race &religion form the basis for the sub-culture.


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3. Social Class : People having similar lifestyles,interest, values, behaviours, & norms aregrouped under a social class. Their similarity inbeliefs forms the basis for market segmentation,and effects their shopping patterns or the kindof products / services they purchase. Thus,

marketers offer products & services aimed atthe social class of people.


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4. Reference groups : An individualuses the perspectives of a reference

group as the basis for his actions,judgement & opinion. Marketers makeuse of reference group influences todevelop ads by associatingproducts/services or some behaviourswith some types of reference groups.


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5. Family : Purchases are often notmade by individuals alone, but a whole

lot of other people too have a say in thepurchase decision. Marketers need torecognise the role played by thesevarious individuals in the purchasedecision, in order to target theirmarketing message at them.


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BUYING DECISION PROCESS :

Marketers are interested in understanding howconsumers make buying decision,especially who

makes the decision, type of buying decision & thesteps involved in the buying process. Often it is foundthat its a complex process with several influencingfactors controlling it. The following are the five

distinguishable roles people play :


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1. Initiator the person who first suggests the idea

of buying the product or service. 2. Influencer the person whose view, opinion or

advice influences the decision.

3. Decider the person who decides on any

component of a buying decision whether to buy,what to buy, how to buy, when to buy or how muchto buy.

4. Buyer the person who makes the actualpurchase.

5. User the person who finally uses or consumesthe product or services.


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CUSTOMER EXPECTATIONS &PERCEPTIONS

Philip Kotlers definition of Satisfaction :Its the level of a customers felt stateresulting from comparing a products orservices perceived performancestandard against the customers

expectations.

Understanding Customer Requirements:


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Simply stated we have three things :

1. Perception : What the customer knows about aproduct / service,

2. Expectation : What the customer expects from theproduct / service when he buys,

3. Satisfaction : What the customer gets after using itboth mentally & physically as compared to what he

has expected in a positive way. Or it is the differencebetween what he gets & what he expects.

Types of Services &


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ypExpectations :

1. Adequate Services : This is the minimum level ofservice that the customers are willing to accept froma service provider, and is based on customers

perception of what level of service is available tothem. Customers are heavily dissatisfied ordisappointed if the level of service is below theadequate level of expectations. And if this is metthen satisfaction occurs. This level sometimes maychange due to specific situations & the customersperception of available alternatives.


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2. Desired Services : This level is above the minimumlevel of service and is the level of expectation whichthe customers desire or hope. This level is a function

of the customers exposure of better services,knowledge & information about services. If this levelis met or exceeded then the customer is delighted.This level may change depending on situation andfrom customer to customer.


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3. Predicted services : This level is somewhere inbetween the adequate & desired levels of servicesand are decided by several external factors, like

situation, time, place, past experience, etc. And thisin turn affects the level of adequate service.

4. Zone of Tolerance : The difference or the gapbetween the adequate & desired levels of services is

the Zone of Tolerance and just plain satisfactionoccurs here.


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Implication for Service Provider :

Knowledge of the factors

influencing CB has severalimplications for service providers


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1. Customers gather & rely oninformation obtained from personal

sources when making service purchasedecisions. Marketers should be carefulin satisfying customers by meeting orexceeding their expectations.Otherwise,customers might spread negative word-of-mouth publicity.


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2. Time being a crucial factor in gaining ahead of thecompetitors, customers in the new millennium are

willing to trade off money against time. Serviceproviders, thus compete on the basis of time taken todeliver the service. Transportations & logistic servicesthat are time bound provide new opportunities for

service providers to differentiate themselves from theircompetitors.


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3. The intangibility characteristics of service provides agood opportunity and can be well exploited by serviceproviders to provide services on line. Unlike in physicalgoods, services can be offered electronically.

4. Customers in the new millennium demand bothquality & customisation simultaneously. This possessesa challenge for service providers as both these aspectshave different requirements. Quality requiresstandardisation while customisation requires variability.However, marketers can meet this challenge by beinga little creative.


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THANKS

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